by CIO Staff

U.S. Tech Trade Deficit Wider Than Expected

Apr 19, 20063 mins
IT Leadership

The high-tech trade imbalance in the United States continues to grow at a surprising rate, according to researchers at the American Electronics Association, who released on Wednesday results of an annual study of U.S. high-tech imports and exports.

“From a technology standpoint, the deficit with the world is much larger than expected, and with China it’s much larger too,” said Matthew Kazmierczak, vice president of research and industry analysis for the American Electronics Association (AEA). “We continue to break records we didn’t expect to see.”

In 2005, the United States imported US$96 billion more worth of tech goods than it exported, according to the AEA. That’s more than double the $40 billion high-tech products trade deficit in 1999, Kazmierczak said.

Total high-tech imports to the United States from around the world grew more than twice as fast as exports in 2005. Imports were up 9 percent in 2005, reaching $295 billion while exports grew 4 percent to $199 billion, the AEA found.

With China in particular, the high-tech trade gap continues to widen dramatically. Imports from China to the United States grew 26 percent in 2005, reaching $86 billion, the AEA said. U.S. exports to China grew 10 percent during the same time but reached just $10 billion, a small portion of the value of imports from China.

The numbers make the deficit look a bit worse than it really is, and the imbalance is likely to right itself in time, Kazmierczak said. The figure representing imports to the United States from China includes components that U.S. companies might have made in their factories in China and then shipped to the United States in order to assemble final products that are sold around the globe. Because U.S. companies continue to move manufacturing facilities to China, this portion of the trade deficit continues to grow. But ultimately, the sale of the finished products benefits U.S. companies, he said.

The high-tech products trade deficit can also be a bit misleading because by definition, it includes only tangible goods and not services. In the United States, about 85 percent of the workforce is in non-manufacturing industries, and so the result of their labor isn’t included in the high-tech trade figures, even though they may be doing things like designing high-tech products, he said.

“That’s not to say that the deficit isn’t a concern,” Kazmierczak said. “In the end, the desire is for this to balance out and bring up India and China and the wages there so their ability to purchase goods and products will increase, and as a result, these trade imbalances won’t become so one-way,” Kazmierczak said.

Currently, just 10 percent to 20 percent of the population in China is considered middle class, meaning just a small proportion of Chinese have the disposable income required to buy products that might be exported from the United States, he said.

The report of increasing high-tech trade between the United States and China comes against the backdrop of a highly publicized visit by Chinese President Hu Jintao to Seattle, including a dinner on Tuesday at the home of Bill Gates, chairman and chief software architect for Microsoft. Hu reportedly promised Gates that China, notorious for rampant illegal sales of pirated Microsoft software, is stepping up efforts to protect intellectual property.

-Nancy Gohring, IDG News Service

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